UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant
to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event
reported): December 18, 2015
Bluerock Residential Growth REIT, Inc.
(Exact Name of Registrant as Specified in
Its Charter)
Maryland |
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001-36369 |
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26-3136483 |
(State or other jurisdiction of
incorporation or organization) |
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(Commission File Number)
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(I.R.S. Employer
Identification No.) |
712 Fifth Avenue, 9th Floor
New York, NY 10019
(Address of principal executive offices)
(212) 843-1601
(Registrant’s telephone number, including
area code)
None.
(Former name or former address, if changed
since last report)
Check the appropriate box below if the Form
8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
| ¨ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
| ¨ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| ¨ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| ¨ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
| ITEM 1.01 | ENTRY INTO MATERIAL DEFINITIVE AGREEMENT |
The disclosure
below describes our investment in the Flagler Village joint venture. All figures provided below are approximate.
On December 18, 2015,
Bluerock Residential Growth REIT, Inc., through our operating partnership, Bluerock Residential Holdings, L.P., a Delaware limited
partnership, or our Operating Partnership, made an investment in BR ArchCo Flagler Village JV, LLC, a Delaware limited liability
company, or Flagler Village JV.
Specifically, our
Operating Partnership, made the investment in Flagler Village JV through BRG Flagler Village, LLC, a Delaware limited liability
company and a wholly owned subsidiary of our Operating Partnership, or BRG Flagler Village, which acquired an 89.5% limited liability
company interest, or the BRG Flagler Village Interest, in BR Flagler JV Member, LLC, a Delaware limited liability company, or BR
Flagler Village JV Member, which acquired a 100% limited liability company interest in Flagler Village JV, which is the owner and
holder of a 100% limited liability company interest in BR ArchCo Flagler Village, LLC, a Delaware limited liability company, or
Flagler Village Owner.
Concurrently and through
Flagler Village JV, we caused Flagler Village Owner to acquire certain tracts of land located in Fort Lauderdale, Florida, or the
Flagler Village Parcels, (i) pursuant to that certain Commercial Contract, dated as of November 30, 2015 by and between ArchCo
Residential LLC, or ArchCo, and Metropolitan Property Investment, LLC, a Georgia limited liability company, or the Commercial Contract,
which Commercial Contract was assigned to Flagler Village Owner in that certain Assignment and Assumption of Commercial Contract,
by and between ArchCo and Flagler Village Owner, dated December 18, 2015 and (ii) pursuant to that certain Agreement of Purchase
and Sale by and between ArchCo and Andrews Village, LLC, a Delaware limited liability company, dated January 12, 2015, as amended,
or the PSA, which PSA was assigned to Flagler Village Owner in that certain Assignment and Assumption of Agreement of Purchase
and Sale, by and between ArchCo and Flagler Village Owner, dated December 18, 2015.
We intend to use the
Flagler Village Parcels to develop a 384-unit, urban, six-story, wrap-style, Class A apartment community, or Flagler Village. The
estimated cost to complete Flagler Village is $126,580,000, or $329,635 per unit. Flagler Village is projected to be capitalized
with a senior construction loan in the amount of $88,550,000 representing approximately 70% loan-to-cost.
The total purchase
price paid for the Flagler Village Parcels was $5,733,885. The purchases of the Flagler Village Parcels were based on negotiations
with sellers that were not affiliated with us. In evaluating the Flagler Village Parcels, a variety of factors were considered,
including overall valuation, expected capital expenditures, submarket demographics, expected community features and amenities,
location, expected price per unit and expected occupancy.
The organizational
structure with respect to the ownership of the Flagler Village Parcels is such that: (i) the Flagler Village Parcels are owned
by Flagler Village Owner and (ii) Flagler Village Owner is wholly owned by Flagler Village JV. Flagler Village JV is a joint venture
entity owned 100% by BR Flagler Village JV Member with ArchCo Metropolitan Member LLC, a Delaware limited liability company, or
ArchCo Flagler Village Member, having a profit interest in the Flagler Village JV equal to 12% of profits after the BR Flagler
Village JV Member receives a 15% internal rate of return, compounded monthly, on capital contributions, or the ArchCo Promote.
BR Flagler Village
JV Member
BRG Flagler Village
has made an initial investment of $5,456,174 to acquire the BRG Flagler Village Interest, and Bluerock Special Opportunity + Income
Fund II, LLC, a Delaware limited liability company and an affiliate of our manager, or SOIF II, has made an initial investment
of $640,110 to acquire the remaining common equity of BR Flagler Village JV Member. BRG Flagler Village and SOIF II have entered
into a joint venture operating agreement for the BR Flagler Village JV Member, or the BRG Flagler Village JV Agreement.
The BRG Flagler Village
JV Agreement contains terms, conditions, and indemnities that are customary and standard for joint ventures in the real estate
industry.
Management
The business and affairs
of BR Flagler Village JV Member shall be conducted solely and exclusively by its members, BRG Flagler Village and SOIF II. In the
event of any disagreement or dispute between the members with respect to any action to be undertaken on behalf of BR Flagler Village
JV Member, the decision and determination of SOIF II shall govern such action.
Distributions
Under the BRG Flagler
Village JV Agreement, at the time determined by the members, the members shall cause BR Flagler Village JV Member to distribute
all cash available to the members, 89.5% to BR Flagler Village JV Member and 10.5% to SOIF II.
Flagler Village
JV
BR Flagler Village
JV Member has made an initial investment of $6,096,284 to acquire a 100% limited liability company interest in Flagler Village
JV, and ArchCo Flagler Village Member contributed the Commercial Contract and PSA and certain intellectual property in exchange
for the ArchCo Promote. BR Flagler Village JV Member and ArchCo Flagler Village Member have entered into a joint venture operating
agreement for Flagler Village JV, dated December 18, 2015, or the Flagler Village JV Agreement.
The Flagler Village
JV Agreement contains terms, conditions, and indemnities that are customary and standard for joint ventures in the real estate
industry.
Management and Certain
Decisions
BR Flagler Village
JV Member is the manager of Flagler Village JV. Under the Flagler Village JV Agreement, the manager has broad authority to act,
however, the timing and amounts distributable to the ArchCo Flagler Village Member may not be adversely affected by, and no other
material right of the ArchCo Flagler Village Member shall be effectively subordinated or otherwise diminished by the manager (i)
accepting capital contributions on terms other than the terms that would be applicable if such additional capital contribution
were made by BR Flagler Village JV Member pursuant to the terms of the Flagler Village JV Agreement or (ii) entering into any agreement
regarding a direct or indirect contribution of the Flagler Village Parcels, or a reorganization, merger, or other consolidation
of Flagler Village JV or a subsidiary, or a sale of the Flagler Village Parcels to an entity in which BR Flagler Village JV Member
or an affiliate is a buyer.
Additional Capital
Contributions
The Flagler Village
JV Agreement provides that Flagler Village JV may call additional capital contributions as and when the manager shall determine,
consistent with the development budget, and any approved annual operating budget or for non-discretionary expenses (such as real
estate taxes, insurance or debt service), in each case established by the manager in the good faith exercise of its sole discretion;
provided, however, the ArchCo Flagler Village Member has no obligation to make additional capital contributions. It is anticipated
that the total equity required to develop Flagler Village will be approximately $38,030,000, inclusive of the purchase price of
the Flagler Village Parcels, which BRG Flagler Village and SOIF II are expected to contribute on a proportioned basis of 89.5%
and 10.5%, respectively.
Distributions
Pursuant to the provisions
of the Flagler Village JV Agreement, distributions are made generally as follows: (i) first, to BR Flagler Village JV Member until
BR Flagler Village JV Member has received an internal rate of return on its capital contribution equal to 15% and (ii) second,
12% to ArchCo Flagler Village Member and 88% to BR Flagler Village JV Member.
Development Services
Agreement and Project Administration Agreement
On December 18, 2015, Flagler Village Owner
entered into a development services agreement, or the Development Services Agreement, with BRG Flagler Village Development, LLC,
a Delaware limited liability company and an affiliate of us, or Developer, whereby Flagler Village Owner retained Developer to
provide development management services for Flagler Village. On the same date, Flagler Village Owner, Developer and ArchCo Metropolitan
PM LLC, a Delaware limited liability company and an affiliate of ArchCo, or Project Manager, entered into a project administration
agreement, or the Project Administration Agreement, whereby Developer retained Project Manager to provide development management
services for Flagler Village.
Pursuant to the Development Services Agreement,
the Developer has the authority to take all actions on behalf of Flagler Village Owner, as an authorized agent for Flagler Village
Owner, pursuant to that certain contract between Flagler Village Owner and the architectural firm retained by Flagler Village Owner,
or the Architect’s Contract, except for those powers specifically reserved in the Development Services Agreement or as otherwise
directed in writing by Flagler Village Owner from time to time.
Pursuant to the Project Administration
Agreement, the Project Manager has the authority to take all actions on behalf of Flagler Village Owner, as authorized agent for
Flagler Village Owner, pursuant to the Architect’s Contract, except for those powers specifically reserved in the Project
Administration Agreement or as otherwise directed in writing by Developer from time to time.
Under the terms of the Development Services
Agreement and the Project Administration Agreement, Flagler Village Owner will pay Project Manager (i) a development fee in an
amount equal to three percent (3.0%) of the projected costs and expenses to develop Flagler Village, or the Development Budget,
which fee will be payable twenty-five percent (25.0%) upon commencement of construction and the balance payable in equal monthly
installments beginning the second calendar month following commencement of construction and each month thereafter during the projected
construction period as set forth in the construction schedule approved by Developer, or the Construction Period; (ii) a construction
management fee equal to one percent (1.0%) of hard costs included in the Development Budget, which fee will be payable in equal
monthly installments beginning on commencement of construction and each month thereafter during the Construction Period; (iii)
and its reasonable and accountable out-of-pocket expenses, provided however, the reimbursements may not exceed $50,000 without
the Developer’s prior written consent.
SIGNATURE
Pursuant to the requirements
of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned
hereunto duly authorized.
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BLUEROCK RESIDENTIAL GROWTH REIT, INC. |
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Dated: December 24, 2015 |
By: |
/s/ Christopher J. Vohs |
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Christopher J. Vohs Chief Accounting
Officer |
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